Swiss Ramble: “This is at the heart of Celtic FC issue”, “the proverbial big fish in a small pond”

The Celtic Star

·23 November 2020

Swiss Ramble: “This is at the heart of Celtic FC issue”, “the proverbial big fish in a small pond”

Football’s financial analyst Swiss Ramble has taken a look at the Celtic accounts this morning, and has also given a commitment that he’ll cover theRangers’ set of financial figures which were released late on Friday night, next. We’ll keep an eye out for that but here’s his take on the Celtic accounts.

The conclusion right at the very end is very clear, whatever happens this season Celtic will be selling star players and Odsonne Edouard is mentioned as being the mon candidate to follow in the recent footsteps of Moussa Dembele and Kieran Tierney. Supporters (cough) close to the Celtic CEO were tweeting about the how the worrying loss of form from some players at the club together with the poor results over the past few months is in danger of reducing player values. No idea how they sleep at night with that kind of concern hanging over them as they think about Celtic.

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Here’s Swiss Ramble’s take in the Celtic financials…

Thread covering Celtic’s financial results for 2019/20 season, when they posted a small £0.1m pre-tax profit (£0.4m loss after tax), despite revenue falling £13m due to COVID. Figures boosted by £24m profit on player sales (Tierney to Arsenal) #CelticFC
– Monday, 23 November 2020

Due to COVID, #CelticFC pre-tax profit dropped from £11.3m to £0.1m, as revenue fell £13m (16%) from £83m to £70m, offset by £6m increase in profit on player sales to £24m and £4m reduction in expenses. However, no repeat of prior season’s £9m compensation for Brendan Rodgers.
– Monday, 23 November 2020

All three #CelticFC revenue streams were lower, especially match day, which fell £7.5m (17%) from £43.3m to £35.8m. Commercial dropped £3.6m (15%) from £24.4m to £20.8m, while broadcasting was also down £2.0m (13%) from £15.7m to £13.7m.
– Monday, 23 November 2020

#CelticFC wages fell £1.8m (3%) from £56.1m to £54.3m, while other costs were cut £5.2m (18%) from £28.9m to £23.7m, due to less activity. However, non-cash flow expenses increased: player amortisation rose £2.5m (26%) to £12.2m, while depreciation was up £0.6m (28%) to £2.6m.
– Monday, 23 November 2020

#CelticFC revenue had risen £3m (7%) from £50m to £53m in the first half of 2019/20, but it fell £16m (49%) from £33m to £17m in the second half of the season. Club estimates COVID revenue impact as £9.1m: £7.4m due to early season close and £1.7m retail and hospitality.
– Monday, 23 November 2020

#CelticFC chairman Ian Bankier said, “These results are satisfactory in the circumstances”. Given the impact of the pandemic, a £0.1m profit (£0.4m loss after tax) is a fine achievements, especially compared to the £17.8m loss (£17.5m after tax) reported by Rangers.
– Monday, 23 November 2020

COVID has significantly impacted finances in 2019/20 with many leading clubs posting horrific losses, e.g. Roma £184m, Milan £176m, Inter £90m, Barcelona £87m and Juventus £81m. In contrast, #CelticFC “demonstrated the sustainable nature and flexibility of the business model.”
– Monday, 23 November 2020

However, #CelticFC figures greatly benefited from £24m profit from player sales, up £6m (37%) from previous season’s £18m, mainly Kieran Tierney to Arsenal. This was significantly higher than other Scottish clubs, e.g. Rangers only made £0.7m from this activity.
– Monday, 23 November 2020

#CelticFC have posted pre-tax profits five years in a row, amounting to a £36m surplus in that period. In fact, they have generated profits in seven of the last eight seasons with the sole loss in 2014/15 being only £4m.
– Monday, 23 November 2020

#CelticFC strategy has become increasingly reliant on player trading with profits from player sales averaging £19m a season in the last 3 years. Money earned does not only include the initial sales proceeds, but also sell-on fees, e.g. Virgil van Dijk from Southampton to #LFC.
– Monday, 23 November 2020

The two #CelticFC player sales that have generated the highest proceeds both came in the last two seasons: Tierney to Arsenal £24m and Moussa Dembélé to Lyon £20m. Southampton have proved a lucrative market with four sales over £7m to the South coast club.
– Monday, 23 November 2020

Profits from player sales have made a big difference to #CelticFC bottom line. In the last eight years they have generated £102m profit from player trading, compared to just £6m in the same period at Rangers.
– Monday, 23 November 2020

#CelticFC operating loss (i.e. excluding player sales) widened from £6.2m to £24.5m in 2019/20, down from a £5m profit in 2016/17. Although most clubs post operating losses, this is the highest in Scotland, around £9m worse than Rangers’ £15.9m deficit.
– Monday, 23 November 2020

#CelticFC revenue has now fallen £31m from the £102m high two years ago to £70m, mainly driven by £20m media rights, but also match day £7m and commercial £4m. On the other hand, revenue is up by more than a third (£18m) from £52m in 2016.
– Monday, 23 November 2020

#CelticFC have enjoyed a substantial revenue advantage over their rivals Rangers in recent times, but the gap has narrowed over the last three years from £69m in 2018 to £11m in 2020.
– Monday, 23 November 2020

The Old Firm generate significantly more revenue than other Scottish clubs. For example, #CelticFC £70m is more than four times as much as Hearts £15m and Aberdeen £14m, followed by Hibernian £11m, Kilmarnock £7m, Motherwell £5m and St. Mirren £4m.
– Monday, 23 November 2020

To highlight the magnitude of #CelticFC challenge, their £83m revenue in 2018/19 was around £70 below the £154m required to be in the Top 30 European clubs, as shown in the Deloitte Money League, which ranks clubs globally by revenue.
– Monday, 23 November 2020

This might seem like a somewhat pointless comparison, but the fact is that in 2004 #CelticFC were placed as high as 13th in the Money League. Since then, their revenue has only grown by £14m, while the club in 20th place has increased by £127m and the top club by £570m.
– Monday, 23 November 2020

This is at the heart of #CelticFC issue, i.e. they are the proverbial big fish in a small pond. In 2018/19 the Scottish Premiership generated £240m revenue, miles below the likes of England £5.9 bln and Spain £3.4 bln, but also behind Belgium £344m and Austria £256m.
– Monday, 23 November 2020

For some more perspective, #CelticFC £83m revenue in 2018/19 was £36m lower than the bottom club in the Premier League, namely Huddersfield Town with £119m.
– Monday, 23 November 2020

Of course, the comparison is a bit misleading, as English clubs benefit from huge TV money. Comparing #CelticFC with West Ham, match day is £8m higher, commercial is only £4m lower, so the Glaswegians’ revenue would be higher with the same TV deal, placing them 7th in England.
– Monday, 23 November 2020

In contrast, Scottish Premiership TV deal is very low, so #CelticFC only received £3.4m for winning the title. To put this into perspective, Premier League winners got £152m, while last place was worth £97m. Even a Championship club (no parachute payments) got twice as much £7m.
– Monday, 23 November 2020

There is a new five-year Scottish Premiership TV deal with Sky Sports worth £30m a year from 2020/21, but this is not really going to move the needle. For example, it’s still only around half of Poland’s Ekstraklasa £58m.
– Monday, 23 November 2020

In total, #CelticFC broadcasting revenue fell £2.0m (13%) from £15.7m to £13.7m, just ahead of Rangers £13.5m, then a big gap to Hearts and Aberdeen, both £3.0m. The decrease was due to League being curtailed and Scottish Cup not being completed.
– Monday, 23 November 2020

Based on my estimate, #CelticFC earned €11.2m from reaching Europa League last 32, split between starting fee €2.75m, prize money €4.6m, UEFA coefficient €2.3m & TV pool €1.6m. Also received €1.1m for 3 qualifying rounds in Champions League. About the same as prior season.
– Monday, 23 November 2020

European qualification is extremely important for #CelticFC, who have earned €98m from Europe in last 5 years, almost 5 times as much as Rangers €17m. Champions League is the real differentiator with Celtic getting over €30m in both 2017 & 2018, when they reached group stage.
– Monday, 23 November 2020

It is therefore significant that recent good performances in Europe by #CelticFC and Rangers have improved Scotland’s UEFA coefficient, thus almost guaranteeing that the 2021/22 Scottish champions will automatically qualify for the Champions League group stage.
– Monday, 23 November 2020

#CelticFC match day income fell £7.5m (17%) from £43.3m to £35.8m, as 4 Premiership home games were not played after the season’s early closure. This was just ahead of Rangers’ £35.7m, then a big drop to Hearts £6.0m and Aberdeen £3.7m.
– Monday, 23 November 2020

However, #CelticFC average attendance increased from 56,729 to 57,857, nearly 9,000 more than Rangers’ 49,238. This season the fans’ purchase of season tickets despite uncertainty around when they can return to the stadium has “exceeded all expectations”.
– Monday, 23 November 2020

Match day revenue is particularly important for Scottish clubs, given the low TV deal. According to Deloitte, this accounts for an incredible 48% of total revenue in Scotland with the next highest being Belgium 26%. Thus, live streams help “to protect a key income stream”.
– Monday, 23 November 2020

#CelticFC commercial revenue fell £3.6m (15%) from £24.4m to £20.8m, comprising commercial/sponsorship £8.1m, retail and e-commerce £11.2m and other income £1.4m. This is by far the highest in Scotland, well ahead of Rangers £9.8m, Aberdeen £7.7m and Hearts £6.1m.
– Monday, 23 November 2020

#CelticFC have a new 5-year kit deal with Adidas from July 2020, described as “the biggest kit sponsorship ever to be announced across Scottish sport”. Similarly, the Dafabet deal runs until 2025 and is “the most lucrative sponsorship agreement in Scottish football history”.
– Monday, 23 November 2020

#CelticFC trimmed their wage bill by £1.8m (3%) from £56.1m to £54.3m, so this has fallen by £5m (8%) from the £59m peak in 2018, though revenue fall means the wages to turnover ratio has increased from 58% to 77%.
– Monday, 23 November 2020

Similar to revenue, Rangers have closed the wages gap to #CelticFC in the last 3 years from £35m in 2018 to £11m in 2020. There remains an abyss between the Old Firm and the other Scottish clubs, e.g. the next highest are Aberdeen £10m, Hearts £8m and Hibernian £6m.
– Monday, 23 November 2020

The deterioration of #CelticFC wages to turnover ratio to 77% means that this is the highest of the three Scottish Premiership clubs that have published 2019/20 accounts to date, worse than Rangers 73% and Aberdeen 68%.
– Monday, 23 November 2020

Just for a bit of fun, a comparison with the Premier League shows that #CelticFC £56m wage bill in 2018/19 was lower than every club with the exception of Cardiff City £54m. The English “Big Six” wages were 3-6 times as much (#MUFC £332m, #THFC £179m).
– Monday, 23 November 2020

As a result of investment in the squad, #CelticFC player amortisation, the annual cost of writing-off transfer fees, increased by £2.5m (25%) from £9.7m to £12.2m, which means that this expense has more than doubled in just four years from £5.0m in 2016.
– Monday, 23 November 2020

As a rule, Scottish clubs do not pay big money to sign players, meaning that their player amortisation charge is normally very low. In fact, #CelticFC and Rangers are the only clubs booking more than £500k a year, though Celtic’s £12.2m is much more than Rangers’ £7.6m.
– Monday, 23 November 2020

#CelticFC “invested record sums into the playing squad” with £21m on purchases in 2019/20, though they still reported net sales of £4m. The last time the club had net spend was £10m in 2017, though similar sum spent this season.
– Monday, 23 November 2020

#CelticFC player purchases of £21m was easily more than the rest of the Scottish Premiership combined (next highest Rangers £11m). Acquisitions included Christopher Julien, Patryk Klimala, Boli Bolingoli, Ismaila Soro and Hatem Abd Elhamed.
– Monday, 23 November 2020

#CelticFC gross debt is only £5.3m with a £22.4m cash balance producing net funds of £17.1m. The debt comprises £4.1m Co-operative bank loans (LIBOR + 3%) plus £1.2m finance leases. Post year-end revolving credit facility was increased from £2m to £13m as a buffer, if required.
– Monday, 23 November 2020

#CelticFC £5.3m debt is second largest in Scotland, but a long way below Rangers £19.3m, which would have been even higher without the club from Ibrox converting £34.3m of loans into shares in last 2 seasons. Note: Celtic’s figures excludes £4.2m convertible preference shares.
– Monday, 23 November 2020

#CelticFC lost £3.6m cash from operating activities in 2019/20, then spent £3.9m (net) on player purchases, £1.2m on in infrastructure and £0.4m tax. They also repaid £2.1m of loans and paid £0.5m dividends on the preference shares, leading to £11.7m net cash outflow.
– Monday, 23 November 2020

As a result, #CelticFC cash balance dropped from £34.1m to £22.4m, though this was still by far the highest in Scotland, more than double Rangers’ £11.1m.
– Monday, 23 November 2020

Over the last 10 years #CelticFC have had £54m available cash, entirely generated from their operations. Highest expenditure: infrastructure £20m, debt repayment £8m, dividends £5m, tax £4m and interest £1m. Broke-even on player trading. Bank balance increased by £17m.
– Monday, 23 November 2020

This year’s figures will likely see a large loss due to COVID, but #CelticFC “remain committed to the strategy of careful use of our financial resources”. This will probably mean the profitable sale of some of their better players like talented French striker Odsonne Edouard.
– Monday, 23 November 2020

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